Industry News

London office drought 29th January 2015

If London is to reach its economic potential in 2015 and beyond, its office space must be protected. Otherwise, the lack of affordable housing in the capital will be matched by a lack of affordable office space.

The crisis in the provision of housing for Londoners is an undeniable issue; for London to remain a thriving destination for business, quality affordable housing must be available or workers will look for jobs elsewhere – as was highlighted last week by new research from London First. Its report also found that only half the 50,000 new homes needed every year are being built.

This is one of the challenges of London’s success that all boroughs need to face. The City is doing its part with a new affordable housing development opening in Southwark, with more planned for the future. But there is another emerging crisis that could have just as large an impact on London’s future: the growing lack of office space available to London businesses.

New figures from Deloitte show availability falling by 14 per cent in a year – to a vacancy rate of just 4 per cent in the West End. In parts of the Square Mile that figure is just 2 per cent. The shortage is in part due to London’s success as a business centre, but another cause has been the drive to convert office buildings into flats, made easier by a change in the planning rules affecting most of London.

This is not the solution to the capital’s housing crisis: it is a noose around the neck of the creative industries we need for future growth. Startups, SMEs and the agile, niche businesses which serve them, need space to grow, and the City’s range of office buildings serves these needs perfectly. This is one of the reasons why our recent research identified serviced offices as such a growth area. We need more of these spaces, not fewer, both in the City and in Tech City on the Square Mile’s fringe.

That is why schemes such as the Bishopsgate Goods Yard plan to create luxury housing on an important commercial site are concerning. This is an opportunity to reinforce the business cluster and ensure economic vitality for decades, and it would be wasted by the inappropriate provision of luxury flats on a key commercial site. Providing office space in important employment centres which are well-served by public transport is integral to the clustering effect that is a large part of the City’s success.

The City’s new Local Plan codifies our commitment to new office building and to the protection of existing offices that growing firms need. It is in the long-term interests of London to have a City with affordable office space, where dynamic companies succeed or fail on their merits rather than struggle to compete for space with soaring residential values. Decimating London’s office stock won’t solve the housing crisis, but it will drive away the jobs that Londoners need. We need to plan for more houses and offices, with priority for jobs in central areas.